Bond writing, underwriting, and collateral
Bond writing, underwriting, and collateral
This domain tests the transaction: evaluating the defendant, executing the bond, taking collateral, and documenting the indemnity. The exam expects you to connect underwriting judgment to the fiduciary duty to hold and return collateral properly.
Core rules
- Use the approved bond form, attach the surety's power of attorney, and match the court, cause number, charge, amount, and conditions exactly.
- Underwrite before writing: verify identity, residence, employment, ties to the community, criminal history, flight risk, and the indemnitor's ability to pay.
- Collateral must be described, valued, receipted, and kept safe. Do not commingle collateral with operating funds or use it for personal expenses.
- The indemnitor agreement should disclose joint and several liability, the nonrefundable premium, and the conditions for collateral return.
- Return collateral promptly when the bond is exonerated or the indemnitor is released, accounting for lawful charges.
Worked example
A defendant facing a $100,000 bond has no local ties and offers a car worth $8,000 as collateral. Writing the bond because "the premium is good" leaves the surety exposed for $100,000 and the bondsman exposed on indemnity. Better reasoning: decline, require real property or a financially responsible indemnitor, or reduce exposure only with insurer approval. Document the decision.
Traps
- Taking collateral without a signed, itemized receipt.
- Overvaluing property or accepting a car without checking liens and title.
- Failing to attach the power of attorney.
- Oral promises about collateral return.
- Using collateral before exoneration.